Tough Road Ahead for IBM India Chief

IBM’s two major global bets — cloud and cognitive — are also the two weakest areas for the computing giant in India, where it seems to be struggling in a highly competitive market. Will the new India MD be able to get the company back on track?

A report from Greyhound Research says IBM is taking a beating from both local and global competition in the public cloud space with its offering Softlayer and its cloud platform Bluemix failing to attract enough takers.

The report says that while IBM is expected to continue with its growth momentum in FY17-18, it will largely be backed by just one multi-million deal renewal with Vodafone India.

“We believe this growth in the current FY is a one-off and does not take away the broader underlying issue of IBM India being highly dependent on the traditional deal mix plagued with shrinking margins. Greyhound Research believes replicating a similar success story in FY 17-18 will be a lofty (not impossible) task for the newly announced management at IBM India,” the report said.

IBM India’s woes with its current domestic IT services business mix can only be expected to multiply in FY 17-18, the Greyhound report said, highlighting the company’s high dependence on traditional services such as data centre infrastructure, servers, network management, application management services and other maintenance support services.

The report also talks about how IBM has been unwilling to engage in outcome-based deals, which are increasingly becoming the norm, along with smaller deals with cloud components instead of large strategic outsourcing deals.

“With Strategic Outsourcing deals (both new and a refresh of existing ones) fast becoming few and far between, margin pressures touching an all-time high and business outcomes increasingly becoming a de facto standard, ensuring growth, avoiding a flattish revenue, increasing deal margin and changing the broader deal mix can well be expected to be the focus of the new leadership,” said Sanchit Gogia, Chief Analyst & CEO at Greyhound Research, who co-authored the report along with Anshoo Nandwaani, Principal Analyst at the firm.

[The Hindu Business Line]

Read the full report by Greyhound Research here.

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